Washington’s June Revenue Forecast Shows Small Improvements
On Tuesday, June 18, the Washington State Economic & Revenue Forecast Council (ERFC) released its quarterly update of General Fund-State (GFS) revenues. Compared with the March forecast, expected GFS revenues are up $110 million for the current biennium (2011-13) and $121 million for the next biennium (2013-15), meaning legislators have an additional $231 million to factor into their budget negotiations.
While these changes are positive, they represent very minor adjustments. Under the updated forecast, the state is expected to take in $30.65 billion in the current biennium and $32.66 billion in the next, thus the increases represent adjustments of less than 0.5 percent each.
Most of the positive variance came from increases in forecasted housing construction, taxable real estate activity, and Revenue Act taxes. Real estate excise taxes came in $34 million (34 percent) higher than forecasted and Revenue Act taxes came in $54 million (2 percent) higher—exceeding the January 2008 pre-recession peak. Lower than expected inflation and employment worked against these gains, but weren’t enough to negate them. Although Washington employment has been slowly increasing in most sectors (especially construction), aerospace and government employment are in decline.
It is important to note that much uncertainty surrounds the council’s 2013-15 baseline forecast due to the Federal sequester, Europe’s recession, and China’s slowing economic growth. The ERFC gives its baseline a 50 percent probability and its optimistic and pessimistic alternative forecasts 20 percent and 30 percent respectively. The optimistic forecast is $2.5 billion above the baseline and the pessimistic forecast is $2.5 billion below.
In addition, it should be noted that, like the March forecast, the June update did not assume any revenue from taxable marijuana sales as the Federal Government’s response to Initiative 502 is still unclear.
Some state lawmakers are optimistic that the new forecast will expedite their budget negotiations; however, the two sides’ have a ways to go before the end of the fiscal year on June 30th (12 days from now). “We’ll get closer as a result of this,” said Representative Ross Hunter during a press conference Tuesday morning.